[Congressional Record Volume 142, Number 14 (Thursday, February 1, 1996)]
[Senate]
[Pages S740-S741]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KOHL (for himself and Mr. Specter):
  S. 1556. A bill to prohibit economic espionage, to provide for the 
protection of United States proprietary economic information in 
interstate and foreign commerce, and for other purposes; to the 
Committee on the Judiciary.


                   the economic espionage act of 1996

 Mr. KOHL. Mr. President, we have a problem in America today: 
The systematic pilfering of our country's economic secrets by our 
trading partners which undermines our economic security. It would not 
be unfair to say that America has become a full-service shopping mall 
for foreign governments and companies who want to jump start their 
businesses with stolen trade secrets.
  Sadly, we are under-unequipped to fight this new war. Our laws have 
glaring gaps, allowing people to steal our economic information with 
vitual impunity.
  So I introduce the Industrial Espionage Act of 1996 with Senator 
Specter. I am also pleased to cosponsor with Senator Specter the 
Economic Security Act of 1996. Together these laws will enable Federal 
law enforcement agencies to catch and vigorously prosecute anyone who 
tries to steal proprietary information from American companies. Our two 
measures should be read together as a unified approach to the problem. 
They are not panaceas, but they are an effort to deal with this problem 
systematically and comprehensively. The Department of Justice and the 
FBI have also been extremely helpful in drafting these pieces of 
legislation, and we look forward to working with them as we move these 
measures forward.
  Mr. President, businesses spend huge amounts of money, time, and 
thought developing proprietary economic information--their customer 
lists, pricing schedules, business agreements, manufacturing processes. 
This information is literally a business's lifeblood. And stealing it 
is the equivalent of shooting a company in the head. But these thefts 
have a far broader impact than on the American company that falls 
victim to an economic spy. The economic strength, competitiveness, and 
security of our country relies upon the ability of industry to compete 
without unfair interference from foreign governments and from their own 
domestic competitors. Without freedom from economic sabotage, our 
companies loose their hard-earned advantages and their competitive 
edge.
  The problem is not new. But with expanding technology and a growing 
global economy, economic espionage is entering its boom years. American 
companies have estimated that in 1992, they lost $1.8 billion from the 
theft of their trade secrets. A 1993 study by the American Society for 
Industrial Security found a 260-percent increase in the theft of 
proprietary information since 1985. And the theft of these secrets is 
not random and disorganized. The press has reported that one government 
study of 173 nations discovered that 57 of them were trying to get 
advanced technologies from American companies. The French intelligence 
service has even admitted to forming a special unit devoted to 
obtaining confidential information from American companies.
  Let me give you a few examples. Just last year, a former employee of 
two major computer companies admitted to stealing vital information on 
the manufacture of microchips and selling it to China, Cuba, and Iran. 
For almost a decade, he copied manufacturing specifications--
information worth millions of dollars. And armed with it, the Chinese, 
Cubans, and Iranians have been able to close the gap on our technology 
leads. Late last year, the FBI arrested this man and charged him with 
the interstate transportation of stolen property and mail fraud. It 
appears that the charges may be a bit of a stretch because he did not 
actually steal tangible property. He only stole ideas.
  Not all of the theft is sponsored by foreign governments. Domestic 
theft is as reprehensible and as threatening as theft by foreign 
governments. For example, in Arizona, an engineer for an automobile air 
bag manufacturer was arrested in 1993 for selling manufacturing 
designs, strategies, and plans. He asked the company's competition for 
more than half a million dollars--to be paid in small bills. And he 
sent potential buyers a laundry list of information they could buy: 
$500 for the company's capital budget plan; $1,000 for a piece of 
equipment; $6,000 for planning and product documents.
  Sadly, current civil remedies are inadequate to deal with these 
problems. Although many companies can privately sue those who have 
stolen from them, these private remedies are too little, too late. A 
private suit against a foreign company or government often just goes 
nowhere, and the company continues to use the stolen information 
without pause.
  Similarly, our current criminal laws are not specifically targeted at 
protection of proprietary economic information. Most of our Federal 
theft statutes deal with tangible property and not intellectual 
property. Federal prosecutors have done a valiant job finding laws they 
can use against these people, but they need something stronger and more 
coherent than what they have gerry-rigged.
  Mr. President, the Industrial Espionage Act and the Economic Security 
Act provide the solution we need. These measures are simple, 
straightforward, and effective. They carefully define proprietary 
economic information--the data that corporations privately develop and 
need to maintain in secrecy. People who steal that information in order 
to harm the business that rightfully owns and developed it are subject 
to criminal penalties. They can serve up to 15 years in jail. And if 
the theft is sponsored by a foreign government, the penalties are even 
harsher. Moreover, the bills include forfeiture provisions, so that 
people will not benefit from their illegal acts. They authorize the 
President to impose sanctions on countries that engage in these 
activities. And they assure companies that their proprietary 
information will 

[[Page S741]]
not seep out during a criminal persecution.
  We need to take steps to stem the flow of information out of our 
country. We need a new law that definitively and harshly punishes 
anyone who steals information from American companies. Over the coming 
months, these measures will provide a framework for our discussions 
about the best way to solve this problem, and we plan to hold hearings 
on them in both the Intelligence and Judiciary Committees.
 Mr. SPECTER. Mr. President, I am pleased to join Senator Kohl 
as a cosponsor of this bill to make theft of proprietary information a 
crime. Senator Kohl is also a cosponsor of a bill I have introduced to 
cover economic espionage by foreign governments or those acting on 
their behalf and this bill is designed to protect that same vital 
economic information from theft by nongovernmental entities and 
individuals.
  While economic espionage by foreign governments presents a clear 
issue of national concern, the economic cost of industrial espionage by 
domestic and nongovernment-owned foreign corporations may be even 
greater. Federal law already provides some sanctions to protect 
technology and innovation within the United States. For example, we 
accord protection to patents, trademarks, and copyrights. The Federal 
Government will not enter into a contract with a bidder who has inside 
information of another bidder's price. There are also laws in some 
States that specifically address the theft of proprietary information.
  These laws may not, however, be adequate. Thus, I am also joining 
Senator Kohl in cosponsoring legislation to provide criminal penalties 
in title 18 of the United States Code for cases in which corporations 
and individuals, foreign or domestic, steal proprietary information 
from U.S. entities. While the bill I have introduced amending the 
National Security Act of 1947 focuses on our Nation's economic security 
against foreign governments, similar arguments can be made that 
protection is also needed for domestic economic interests from theft by 
nongovernmental sources. Moreover, even where there are strong 
indications that a foreign government is behind the theft of 
proprietary information, it may not be possible in all cases to prove 
such government involvement.
  The normal recourse for protecting proprietary information from theft 
by private sector sources is through civil remedies governed by State 
law. Some businesses and Federal law enforcement agencies, however, 
believe that current State laws are inadequate and fail to provide 
remedies, particularly with respect to the kind of intangible 
proprietary information that is typical in today's computer age. They 
argue that comprehensive federal criminal sanctions are needed at this 
time to provide an adequate deterrent.
  While I believe there are legitimate questions about the need for 
federal criminal penalties in this context, I am also convinced the 
issue needs to be considered. It may be that after thorough review, 
criminal penalties are the best means of deterring the misappropriation 
of proprietary information by individuals or business competitors. On 
the other hand, we may determine that a more efficient response would 
be to create a federal civil cause of action or to leave it to State 
law to develop sanctions against such theft if not committed by, or 
done on behalf of, a foreign government.
  As part of this effort to address the economic threat from the theft 
of proprietary information from U.S. businesses, I therefore believe we 
need to consider how to address such thefts when carried out by the 
private sector. As a result, I am cosponsoring this second bill, with 
the expectation that it will generate discussion and debate and assist 
us in developing the best approach to this problem. I look forward to 
working with all interested parties to reach such a result.
                                 ______